If a retired person goes to work part time as a chaufuer and is paid on 1099 form is that a good thing?

Answer 1

It could be good or not tax-wise.

Are you full retirement age? Then your earnings will not reduce your Social Security payments. If you are not full retirement age, earnings above about $12,000 a year are going to reduce your Social Security $1 for every $2 over the earnings threshhold.

If your income is low and you are doing this to supplement your income, of course that is a good thing. The down side of this activity is that you will pay about 15% Social Security and Medicare taxes on the net earnings, regardless of your other income.

In addition, you may pay income tax. You are required to file a tax return if your net earnings from the 1099 are $400 or more, but you will not pay income tax unless your 1099 and other taxable income are above your standard deduction plus exemption(s).

If your earnings from the job exceed 25K, some of your Social Security benefits may be taxed.

If you are doing this at least in part to fill your time, and not for the income, you might consider putting up to $5k of this money in a Roth IRA. It can be withdrawn without penalty since you are over 59.5 years old. It can stay invested, you are not required to withdraw it. So it could be a cushion for later years, or an emergency fund, or a legacy to your heirs.

And if your total income is below $25K if single ($50K if married), and you save some of your earnings in a retirement account, such as a Roth IRA, you can get a Savers Credit against tax you owe, assuming the Savers Credit is extended for 2007.

Finally, if you are paying for health insurance (not Medicare), you can deduct 100% of that premium off of the 1099 income. You could not do that with a W-2. This may be a large tax advantage for you over a W-2.

Answer 2

you have only had some smoke blown; you're categorised as a contractor and could might desire to fill out a Sch C to attach to your form 1040. it truly is real you will owe no federal earnings tax as you're decrease than $ 5,4 hundred; yet you will owe 15.3% in FICA & MEDICARE tax, or around 600 dollars. simply by fact it truly is decrease than one thousand money you will owe no penalty or pastime for underpayment. flow to IRS.GOV and pull up a sort 4852 it is the variety you report earnings that has been misclassified; occasion, in case you labored as an worker and are despatched a sort 1099-misc in blunders you place the advice down on the form 4852 and the IRS contacts the organization to collect the quantity of unpaid FICA & MEDICARE tax. you utilize this manner 4862 to report your tax return and owe no taxes once you report comparable. of course you will possibly no longer have a job on the comparable place next summer time.

Answer 3

Depends on what you think of as good? With a 1099 you have to fill out a Sch C or Sch CEZ, deduct any expenses, put the net on a Sch SE, and place all numbers in the appropriate spots on form 1040. The FICA on sch SE is 15.3%, and you have your federal and state income tax, too. The employer does not pay their half of FICA; nor do they pay any unemployment, workers comp, etc. A good deal for them.

Answer 4

Probably not. It's income that you have to report that no taxes have been taken out of. Going to feel a tax sting at the end of the year unless you are setting aside income to pay or paying an estimated tax now.

Answer 5

check with SS to be sure, but I think you can earn less than $800 a month and still keep your benefits. After $800 a month it's considered "gainful employment" and they will reduce or cut off your check. And I think you still have to pay taxes and social security out of your pay, which doesn't make sense, paying ss and collecting at the same time, but that's our government.........

Answer 6

it just means they aren't taking taxes out so you'll have to pay them